Nearly every financial guru tells potential budgeters to start their financial management with a simple (but not easy) task: track every single penny.
For some individuals, this is a relatively easy task. It’s just a matter of building financial tracking into their routine. But for most people, tracking expenses is often very difficult.
Thankfully, between modern technology and creative budgeting solutions, there are options for tracking expenses that won’t leave you feeling overwhelmed.
Here are three ways to keep you finances in check without driving stressing yourself out.
1. Use Free Budgeting Software
As a MoneyNing reader, you are no doubt familiar with Mint.com or PersonalCapital.com. After setting up one of these accounts, you then connect all of your banking, credit cards, and other financial accounts, for the site to start tracking expenses for you. Users are able to categorize and subcategorize their expenses. After the initial set up, all that is required from you is to log in regularly to take a gander at what the software has tracked for you.
The biggest pushback I get when I suggest using Mint or Personal Capital to track expenses, is the worry about security. And that’s certainly a concern, particularly after hearing stories of major retailers getting hacked.
However, these companies take security very seriously, and the only completely secure method of tracking expenses is doing it yourself. Think of it this way: the risk of a security breach when you use Mint or Personal Capital is very small, whereas wasting your money by not tracking expenses is pretty much assured.
2. Set (and Stick To) a Spending Limit
Certified Financial Planner Roger P. Whitney does not have the time to be his own part-time bookkeeper, despite working in finance. Because of this, he has come up with an elegant solution to the expense-tracking problem: He sets a maximum monthly spending target for himself, and only transfers that amount from his savings account (where his paycheck is deposited) to his checking account.
This solution gives him a monthly spending framework without forcing him to save receipts or count pennies. As with the option of using Mint or Personal Capital, using Whitney’s spending limit plan means you will have to log into your checking account on at least a weekly basis to make sure you’re not going to overdraw it.
3. Only Track Specific Categories
If you can trust your spending decisions in most categories, one option for tracking expenses is to only pay attention to those categories that are problematic or high cost.
For instance, you might decide to track your dining out expenses for several months to get a sense of how much you are spending on restaurants. Instead of having to keep track of every single receipt or purchase, you then only have to remember to log restaurant receipts, and will still get a good sense of how much extra money you’re spending.
In addition, one of the benefits of tracking every expense is the fact that you will likely think twice before making a purchase because you’ll have to write it down. If you choose your two or three “problematic” spending categories to track, you will still have the benefit of thinking twice about having to track the purchase before pulling out your credit card.
The Bottom Line
You may not be able to keep perfect track of every cent that flows into and out of your life, but figuring out how to keep a handle on your finances, while being true to your personality, will allow you make the most of your money.
How do you track your income and expenses without it becoming a big hassle?
Editor's Note: I've begun tracking my assets through Personal Capital. I'm only using the free service so far and I no longer have to log into all the different accounts just to pull the numbers. And with a single screen showing all my assets, it's much easier to figure out when I need to rebalance or where I stand on the path to financial independence.
They developed this pretty nifty 401K Fee Analyzer that will show you whether you are paying too much in fees, as well as an Investment Checkup tool to help determine whether your asset allocation fits your risk profile. The platform literally takes a few minutes to sign up and it's free to use by following this link here. For those trying to build wealth, Personal Capital is worth a look.
Editor's Note: Did you know about the service called $5 meal plans? For $5 a month, they send you recipes of delicious, healthy, yet cheap food that costs just $5 a meal.
Several of my friends signed up and they are able to eat at home more because the instructions are easy to follow, making everything convenient. The deal also comes with grocery shopping lists, which saves them so much time. Check it out yourself by clicking here and you too may be able to save more and become healthier at the same time.
{ read the comments below or add one }